August 2008 Archive for Outlook Today

The market was rather quiet today for corn and soybeans but we have the feeling it’s like a spring being tightened until it’s ready to pop. We may see some excitement before the end of the week but I believe it’s more than likely going to be postponed until Tuesday after Labor Day weekend.

It’s all about the crop size right now. We are starting to get a lot of field reports from crop scouts and agronomists walking the fields and the tone seems to be that no one agrees with the USDA numbers. They are all suggesting fields have too many holes, is too late and is turning yellow in many regions of the Corn Belt to post a 155-bu. corn yield. As for beans, the tone seems to be the potential still exists for a bounce but we are quickly running out of time for rain to have a positive impact. Right now it seems most of the crop scouts seem to be giving a bias to yields 41.5 bu./acre or lower.

All of this would suggest September could continue to be a very choppy price time period. My bias, the first of the month will be stronger and then weaken as we move into the end of month if no frost event occurs. As one looks forward, once the combines start to run the potential will develop for a sideways to higher price action into fall as producers are reluctant to sell off the combine due to wide basis patterns and perceived higher price potential.

I don’t talk about livestock much but I must point out the hog charts have not looked good for some time now as sideways trading base develops. Today’s breakout is now going to see the longs on margin call tomorrow. We would anticipate most will not want to go into the weekend with much risk so the weakness should continue into Friday. Downside target should be very close to the March lows. Near term one must be cautious in trying to bottom pick. The good news is once we clean up supplies and get most of the herd liquidation factored into the market I REALLY LIKE the potential of a long term bull market in summer of 2009.

Finally, we are going to take off a little early, no updates now until next Tuesday.

The recommendations and opinions contained herein are based upon information from sources believed to be reliable. However, that information may be incomplete and unverified. There are numerous factors that can affect the markets, which cannot be fully accounted for in the preparation of these recommendations. Those following these recommendations do so at their own risk. The firm and/or customers of the firm may take a position that may not be consistent with the recommendations herein. Any recommendation does not constitute an offer to buy or sell or the solicitation of an offer to buy or sell any commodity interest. Commodity trading involves risks, and you should fully understand those risks before trading.

Right now, the foundation of the bulls’ argument is the crop is behind schedule and very sensitive to a potential fall yield decline. This week’s crop conditions have indicated the crop is starting to drop, which should be expected at this time but not as fast as the bulls need to keep the market concerns alive. Also noted is the weather out looks that the first half of September is going to be warmer than normal. This has helped to quail the concern above frost. The concern about dry conditions persists but the potential for rain coming up Mississippi valley is still high. Finally, with a long holiday weekend coming up many traders are deciding early to take a break and move to the sidelines.

Overall, the corn and bean market looks on the defensive. While there still is the potential to bounce in September it’s appears it’s going to be a lot quieter than we feared less than a week ago. I would suggest all long traders in beans and corn have a definite plan on handling some bullish disappointment between Sept. 15 and Oct. 15 if no weather concerns develop.

Essentially, if you are long right now you should be in a limited risk buying strategy.

As for sellers, I’m still of the opinion the market will stabilize and rebound nicely as we move into Dec to Feb. The real risk is going to be for producers who must sell off the combine and do not have inventory priced or basis locked up.

In both cases I would suggest a retest of the $6.20 level for Dec. corn and $14 for beans should be used get moved what needs to be done.

BEFORE TRADING, ONE SHOULD BE AWARE THAT WITH POTENTIAL PROFITS THERE IS ALSO POTENTIAL FOR LOSSES, WHICH MAY BE VERY LARGE. YOU SHOULD READ THE “RISK DISCLOSURE STATEMENT” AND “OPTION DISCLOSURE STATEMENT” AND SHOULD UNDERSTAND THE RISKS BEFORE TRADING. COMMODITY TRADING MAY NOT BE SUITABLE FOR RECIPIENTS OF THIS PUBLICATION. THOSE ACTING ON THIS INFORMATION ARE RESPONSIBLE FOR THEIR OWN ACTIONS. ALTHOUGH EVERY REASONABLE ATTEMPT HAS BEEN MADE TO ENSURE THE ACCURACY OF THE INFORMATION PROVIDED, UTTERBACK MARKETING SERVICES INC. ASSUMES NO RESPONSIBILITY FOR ANY ERRORS OR OMISSIONS. ANY REPUBLICATION OR OTHER USE OF THIS INFORMATION AND THOUGHTS EXPRESSED HEREIN WITHOUT THE WRITTEN PERMISSION OF UTTERBACK MARKETING SERVICES INC. IS STRICTLY PROHIBITED. COPYRIGHT UTTERBACK MARKETING SERVICES INC. 2008.

The bulls will be eating steak and drinking Champaign tonight! The rallies today were impressive across the board. Gold has now moved above $800, Crude oil bounced off the 112 level and attacking 120, and the dollar was sharply weaker across the board. All of the outside factors are supportive to commodities.

In regards to corn it was strong from the opening bell and moved higher leaving many wanting to be buyers in its dust. The corn market is now approaching technical overhead resistance level that should be very strong. If you look at the chart below there are several chart points which indicate massive overhead resistance at $6.30 to $6.50 price range. If we take these levels out I would have to believe it would be solid confirmation that the crop yield has been significantly impacted. I would suggest producers need to be in a “put format” right now. That means limited cash flow risk and I would generally suggest no more than a 50% hedge position. If you short futures roll into puts, if your short cash, put some form of vertical call strategy in place.

SOURCE: CBOT PAST PERFORMANCE IS NOT NECESSARILY INDICATIVE OF FUTURE RESULTS. ALTHOUGH EVERY REASONABLE ATTEMPT HAS BEEN MADE TO ENSURE THE ACCURACY OF THE INFORMATION PROVIDED, UTTERBACK MARKETING SERVICES INC. ASSUMES NO RESPONSIBILITY FOR ANY ERRORS OR OMISSIONS.

The Nov. 08 bean chart shows the market moving back above previous uptrending support which is very positive. The next really important hurdle will now be between $14.25 and $14.60. If this level is closed above with good volume one has to expect a complete 100% retracement back to the old highs.

SOURCE: CBOT PAST PERFORMANCE IS NOT NECESSARILY INDICATIVE OF FUTURE RESULTS. ALTHOUGH EVERY REASONABLE ATTEMPT HAS BEEN MADE TO ENSURE THE ACCURACY OF THE INFORMATION PROVIDED, UTTERBACK MARKETING SERVICES INC. ASSUMES NO RESPONSIBILITY FOR ANY ERRORS OR OMISSIONS.

What’s pushing the market so much? Well it’s the crop conditions. With the head and lack of rain the crop is dropping in overall quality. The question is how much? Right now the trade is attempting to factor in all the bullish potential of the market. It’s essentially trying to ration usage a little now in case the crop is actually lower than anticipated. The risk I see developing is if a frost event does not occur we could have most of the bullish expectation in this market by the first week of September. So new buying at this late time schedule has to be very cautious. I like in the money calls or long futures and short deep out of money calls.

It should be note worthy that wheat market is now in a very bullish profile. Strong exports are pushing wheat higher right now. In fact we sold a good chunk of wheat to IRAN. This is motivating a solid price breakout.

The July 09 wheat chart has broken above the uptrending support line. As a producer of wheat you should not allow the market to move back below the $9.20 level before starting on a floor on positions and you should be 100% protected if the market starts to close below $8.50. As for overhead resistance we should have a lot of problems around $10.20 to $10.35. I have to suggest the wheat rally right before planting time is the best thing we can see to encourage increased plantings.

SOURCE: CBOT PAST PERFORMANCE IS NOT NECESSARILY INDICATIVE OF FUTURE RESULTS. ALTHOUGH EVERY REASONABLE ATTEMPT HAS BEEN MADE TO ENSURE THE ACCURACY OF THE INFORMATION PROVIDED, UTTERBACK MARKETING SERVICES INC. ASSUMES NO RESPONSIBILITY FOR ANY ERRORS OR OMISSIONS.

Of all the commodities right now wheat is my highest watch list for getting a floor on positions. If your cash flow is tight, you are going to be forced to buy puts. If your banker understands margin calls now is the time to start scale up selling to lock up a good 2009 price and if prices move significantly higher lock up a great profit for 2010. Remember, there is a lot of land in many parts of the world that could easily come back into production in wheat. Over $10 wheat, I have to be believe, will encourage such acreage growth.

BEFORE TRADING, ONE SHOULD BE AWARE THAT WITH POTENTIAL PROFITS THERE IS ALSO POTENTIAL FOR LOSSES, WHICH MAY BE VERY LARGE. YOU SHOULD READ THE “RISK DISCLOSURE STATEMENT” AND “OPTION DISCLOSURE STATEMENT” AND SHOULD UNDERSTAND THE RISKS BEFORE TRADING. COMMODITY TRADING MAY NOT BE SUITABLE FOR RECIPIENTS OF THIS PUBLICATION. THOSE ACTING ON THIS INFORMATION ARE RESPONSIBLE FOR THEIR OWN ACTIONS. ALTHOUGH EVERY REASONABLE ATTEMPT HAS BEEN MADE TO ENSURE THE ACCURACY OF THE INFORMATION PROVIDED, UTTERBACK MARKETING SERVICES INC. ASSUMES NO RESPONSIBILITY FOR ANY ERRORS OR OMISSIONS. ANY REPUBLICATION OR OTHER USE OF THIS INFORMATION AND THOUGHTS EXPRESSED HEREIN WITHOUT THE WRITTEN PERMISSION OF UTTERBACK MARKETING SERVICES INC. IS STRICTLY PROHIBITED. COPYRIGHT UTTERBACK MARKETING SERVICES INC. 2008.

All participants now are now getting a strong dose of market volatility or wide daily trading ranges. This is increasing the cost of the calls and puts and could potentially increase the Chicago Board of Trade margin requirements to hold positions. What’s behind all the increased volatility?

Well the trade is saying it has more unknown factors in the future than known but traders' opinions are becoming very polarized on which way the market is going, therefore the big price swings.

The recent ProFarmer crop tour has suggested USDA crop potential of 155 bu. or higher could be seen which gives some support to the August crop production report which is decisively bearish. The opposite of this bearish argument is the crop is late and a ProFarmer survey also suggested significant damage to the crop “will” be seen if we have a frost in the northern Corn Belt before Sept. 15 [which is the normal frost dates]. Bottom line: The weather over the next 30 days is going to have major impact on the corn market for the next several months. If we see the crop get bigger, don’t be surprised to see a major selloff in September into early October as the current crop of bottom pickers gets destroyed as we move below $5.05 December lows. Equally, if a significant frost occurs before Oct. 1 don’t be surprised to hear a lot of talk about below 151 bu. corn yields and even a little talk of 148 bu. This would ignite the corn market as producers with unpriced grain would store and the bin doors would have major padlocks put on them to early spring.

Implication on marketing plan: More than ever this is not the time to be hitting for the bleachers. Essentially, we want to first get on base and get the trend moving in our favor before going for the win. This implies to me one should be looking at buying serial in the money calls versus buying futures for aggressive players. For clients wanting to get call protection in place before they sell this winter, I still believe you need time. This means you are going to have to pay for it. My suggestion is to be long the July 2009 and even consider buying the December 2009 futures. The only concern I have heard is your buying carry.

Conclusion: Remember the market is many times about expectation, not reality. The pattern seems to me that most of the risk of frost will be factored into the market before the event and only move higher after the event if the damage is actually worse than anticipated.

Special note: I appreciate all the letters I’ve been getting from clients. I’m a little behind right now but I try to answer all questions. The overall tone right now is clients want to buy the market. We are going to discuss this in our seminar (here at New Richmond, Ind.) this weekend. I realize a lot of you can’t get here but if you want the handouts you can call Laura for the seminar packet ($15 plus postage).

The recommendations and opinions contained herein are based upon information from sources believed to be reliable. However, that information may be incomplete and unverified. There are numerous factors that can affect the markets, which cannot be fully accounted for in the preparation of these recommendations. Those following these recommendations do so at their own risk. The firm and/or customers of the firm may take a position that may not be consistent with the recommendations herein. Any recommendation does not constitute an offer to buy or sell or the solicitation of an offer to buy or sell any commodity interest. Commodity trading involves risks, and you should fully understand those risks before trading.

Beans closed lock limit up and corn was not far behind at 23.25 cents up which completely erased Friday’s losses. The attitude at the close tonight was Project (A) would be higher but I would not be surprised to see a higher open and a lower close due to overbought status.

So what’s the game plan? As I’ve been saying for weeks my expectation has been to be a buyer in August. I would have preferred a much more sideways trading band to develop a base but we have to accept what the market gives us. As I sit here in the middle of the Corn Belt, we have been blessed with very good growing conditions. I, however, have to suggest we have missed the last few rains and the corn and bean crop has gone from about as good as it get’s to looking just average. All the wet spots are starting to show and some of the corn is even giving up. This all suggests to me the corn yield is not going to meet USDA's expectation. The issue is how much decline will we see? Unfortunately, a lot of these questions will not be answered until the combines are in the field and the bin door shuts.

My game plan now is for feed buyers to get inventory locked up in the cash if at all possible. If you are reowning previously sold inventory, I like buying nearby in the money calls more than futures. If you want a more long-term attitude, I’m focused on buying December 2009 corn on any 5 to 15 cent correction. If you are using futures, I would seriously look at selling some sort of deep out of money call to give yourself some downside price protection. A close in December 2009 below $5.90 would force me to rethink my long position.

As for beans it’s all about the yield. As I’ve reminded all my Farm Journal clients, a loss of less than ½ bu. takes us below 100 million bushel. A loss of 1½ bu. (which more than likely would be greater with any type of frost in the northern Corn Belt will bring carry dangerous close to zero. How high do you have to take bean prices to ration usage? At this time it’s not $12.89 beans!

My suggestion continues to be long November beans between $12.20 and $12 but don’t allow it to move below $11.70. If you can’t handle the stress of futures, I like buying serial in the money calls. If cash flow is tight, focus on trying to buy at least $1.50 to $2 upside vertical call strategy in the January contract. Bottom line: It’s all up to Mother Nature right now which means major price swings. This implies you should not overtrade your account and be very careful about how much risk your assuming in the position.

Finally, wheat saw a very exciting day to the upside. I would suggest it’s being dragged up by the corn and beans. My bias continues to be the higher we go this fall, the more acres will be planted due to lower input cost. I would suggest you not allow July 2009 wheat to trade below $9.05 before having a floor in place. With all the market volatility, I have to say this year would be an excellent year to be a buyer of puts and roll up rather than sell futures or cash and handle the cash flow of margins or loss of upside potential.

If you need any help with any of these suggestions give us a call at 1-800-832-1488

The recommendations and opinions contained herein are based upon information from sources believed to be reliable. However, that information may be incomplete and unverified. There are numerous factors that can affect the markets, which cannot be fully accounted for in the preparation of these recommendations. Those following these recommendations do so at their own risk. The firm and/or customers of the firm may take a position that may not be consistent with the recommendations herein. Any recommendation does not constitute an offer to buy or sell or the solicitation of an offer to buy or sell any commodity interest. Commodity trading involves risks, and you should fully understand those risks before trading.

After two days of sharp short covering and some panic buying by the bulls, the market was not able to rally. In fact we were lower on project (A) and the day trading session erased Thursday’s gain. Looking to next week, I would expect more cash inventory to be moving into the system as producers start to sweep the bins and prepare for next year’s crop.

So have the lows been made? The December $5.05 low should hold as long as crude oil does not go too much below $110, U.S. yield does not go above 155 bu. per acre, and demand remains at USDA expectations.

However, with all the influence of the outside markets, the primary mover for corn right now is still going to be WEATHER.If we have a lot of heat and rain, one has to assume the lows could be taken out. If we have frost then significant upside risk exists.

What to do?I would continue to suggest next week is time for all sellers to adjust big short positions down to modest risk i.e. if you are short futures, consider moving into $5 puts. Equally if you’re a feed buyer it’s time to get your floor positions in place. Finally, for all producers who want to sell cash or short futures next spring or summer I strongly encourage you to be getting calls in place to defend your upside price risk exposure.

The recommendations and opinions contained herein are based upon information from sources believed to be reliable. However, that information may be incomplete and unverified. There are numerous factors that can affect the markets, which cannot be fully accounted for in the preparation of these recommendations. Those following these recommendations do so at their own risk. The firm and/or customers of the firm may take a position that may not be consistent with the recommendations herein. Any recommendation does not constitute an offer to buy or sell or the solicitation of an offer to buy or sell any commodity interest. Commodity trading involves risks, and you should fully understand those risks before trading.

Producers with unpriced inventory are breathing a sigh of relief because they believe they have a chance to get a solid price rebound. I would suggest the burden of proof has now shifted from the bulls to prove the crops is out there to the bears proving USDA's 155 bu. yield is correct. I believe I’m living in the garden spot of the Midwest and we missed a rain last week. Everything look great last week and in just 5 days you can now see every low spot. The crop is running out of nutrients and the cool nights are simply not pushing the corn and bean crop. My bias is quickly moving from 155 bu. and closer to 152 bu.

The second thing catching my attention is the level of demand USDA has suggested for both corn and beans—especially corn. Going in to the report, I was really expecting a modest decline in feed usage to reflect the impact of $8 corn on livestock production and the expected herd liquidation that we were hearing. The same was expected for ethanol in that talk was very high the plants were being mothballed rather than opened up. Well guess what, the ethanol plants can make money at $7+ corn. They did a decent job of buying grain plus the influence of high price crude. With ethanol now being projected over 4.1 billion crop the implication is demand destruction was not as great as expected.

This all suggests that any yield reduction now in corn and beans could see this market up as fast as it comes down. The pressure now will be on end users to get their feed needs locked up. Producers who are short to start looking to defend upside price risk exposure. Finally, producers need to be making plans now on how they are going to sell a pre-planting price event if the elevators continue to allow limited forward selling. I continue to suggest buying calls over the next three weeks is a preferable way to have upside price protection in place so you can empower yourself to sell grain between February and June next year.

Bottom line: Normally late August is a quiet time period when we can take a breather and prepare for winter. This year it looks like more of the same, a lot of volatility and tough decisions to be made.

The recommendations and opinions contained herein are based upon information from sources believed to be reliable. However, that information may be incomplete and unverified. There are numerous factors that can affect the markets, which cannot be fully accounted for in the preparation of these recommendations. Those following these recommendations do so at their own risk. The firm and/or customers of the firm may take a position that may not be consistent with the recommendations herein. Any recommendation does not constitute an offer to buy or sell or the solicitation of an offer to buy or sell any commodity interest. Commodity trading involves risks, and you should fully understand those risks before trading.

Reader: What are the risk/rewards for the following position: buy $5.70 May call - sell $8.00 May call - sell $5.00 May put, for a net cost of 20 cents?

Response: When you buy the $5.70 May call, you pay a premium and have all the upside potential of the position. When you sell the $8.00 call, you receive the premium. If you put the positions on at the same time, you pay the difference between the premium and you receive the difference between $5.70 and $8.

Let’s look at the numbers.

If the May $5.70 is at 61 cents and the May $8.00 is at 12 cents, you would pay a net premium of 48 cents plus commissions, clearing and related fees (let’s say 3 cents) for a total estimated cost of 51 cents or $2,550. At this point you are spending $2,550 of premium which is all “time value” for the right to make $11,500 if the market moves back to $8, resulting in a net gain of $8,950.

Up to this point you know exactly what your risk is because it is equal only to the premium paid. In this scenario, when you sell the $5.00 put you assume unlimited risk for a specified premium. In this case the May $5.00 put is going for 31 cents—commission and fees of 1.5 cents for a net of 29.5 cents. Remember, when you sell the put, you have “unlimited risk” so one would want to be selling puts close to the seasonal lows, which I believe we are currently entering.

When you implement the position, you must remember your initial cash flow will be $2,550 plus commission and fees for the long calls and you will be required to put up the margin requirement of the short puts that are based on the underlying futures contract. For planning purposes, I would suggest at least ½ of the underlying futures. So when you put the numbers together, you could be looking at an initial cost well in excess of $3,200 which is also well in excess of the margin requirement of futures.

So why not buy the futures contract? As anybody convinced that corn was going to $10 and bought futures would tell you, margin calls hurt and most of the time it forces you to do the wrong thing at exactly the right time. The biggest value of options is you know your risk; but you are paying for that right. The risk of the strategy you asked about is selling puts to long-term reduce the net cost by 29.5 cents. Since I believe we are in the final stages of this year’s bear market, I have no great difficulty recommending selling the puts.

The recommendations and opinions contained herein are based upon information from sources believed to be reliable. However, that information may be incomplete and unverified. There are numerous factors that can affect the markets, which cannot be fully accounted for in the preparation of these recommendations. Those following these recommendations do so at their own risk. The firm and/or customers of the firm may take a position that may not be consistent with the recommendations herein. Any recommendation does not constitute an offer to buy or sell or the solicitation of an offer to buy or sell any commodity interest. Commodity trading involves risks, and you should fully understand those risks before trading.

O.K. guys and gals, we are getting the weakness we want to buy on but if you’re a mere mortal it’s getting really difficult to buy in face of the daily price breaks. Yesterday’s correction in December corn down to the March panic low of $5.21 should be it! If we take out this level the next major support will not be seen until $4.80.

All I can say is we are now moving the market down to critical support levels which should hold. If they are to be breached, I believe several things has to happen. First, we have to confirm in excess of a 154-bu. corn yield next week. I’m at Corn College this week and this is the best corn around. The bias I’m picking up is its good but we have forgotten about all the wet spots. The tone of producers is the combines are not going to find it when they start to run this fall.

The second thing I believe will have to happen is the continued long positions of the trading funds will have to be flushed. Concern about inflation is not over and they will continue to hold position. It should be noted that some of the recent sharp price declines has been due to large trading funds being forced to liquidate their entire commodity positions due to big losses.

Finally, the third thing that I believe must happen to force the market through major support levels is demand has to be confirmed as to being hurt more than the August report is suggesting. I’m hearing the feed wheat supplies are increasing and this could very well hurt corn exports.

The recommendations and opinions contained herein are based upon information from sources believed to be reliable. However, that information may be incomplete and unverified. There are numerous factors that can affect the markets, which cannot be fully accounted for in the preparation of these recommendations. Those following these recommendations do so at their own risk. The firm and/or customers of the firm may take a position that may not be consistent with the recommendations herein. Any recommendation does not constitute an offer to buy or sell or the solicitation of an offer to buy or sell any commodity interest. Commodity trading involves risks, and you should fully understand those risks before trading.

Got a nice rain here today in Indiana. Overall looking out my back door, the crops look about as strong as one can expect. I know the holes are out in the field but I can’t see them. It’s really hard to be bullish. I then talk to producers down in the Southeast. Their crops are a disaster this year. They started out good and simply stopped raining. What crop is out there could have a lot of problems with toxins and may have to be destroyed. This continues to illustrate the difficulty in getting a handle on the size of the crop. The crop conditions report now has the crop bigger than the 10 year average size and well above last year. This would all suggest the risk is growing every day that USDA could increase the crop above 152 bu. in the August report and many believe it could be as high as 154 bu. As for the loss of acres, they should adjust down a little more the harvested acreage figure. So the supply side of the equation is not getting bullish but bearish. As for the demand side of the equation, I fear they will reflect demand based on the assumption of $7 corn and moving higher rather than $5.50 corn and moving lower.

When I put this all together, I have to suggest one has to be prepared for a bearish report. The issue will be how much of the bearish fundamentals have been factored into the market? I have to say the psychology of fear is now about as intense as it gets. You can almost cut the tension of producers I talk to on the phone with a knife. Everybody is kicking themselves about not selling. Traders who said they wanted to be strong buyers below $6 are still on the sidelines waiting for confirmation of a bottom.

I have to say the bears got everything going their way right now. This is when bears better watch out. I'm looking at moving entirely to the sidelines with all 2008 through 2010 corn hedges between August 8th and August 20th. Please note: I don’t see a violent price rebound, I simply believe the logic of being aggressively short 2009 corn below $6 is very limited now when seed costs are going to rise $75 per bag to $125 per bag and fertilizer overall is going to increase $250 per ton to $350 per ton for pre-buy this fall. With this type of increasing cost structure, it will be difficult for producers to aggressively increase corn acres next spring. I’m trying to prepare all sellers of futures or long puts to be looking to move to the sidelines. If you have been a seller of cash via the elevator I would be focused on rolling hedges forward to capture the big carry incentives that currently exist and focus on buying the market for at least 75 cents and perhaps a $1.50 bounce off the bottom as we move into the Jan to March time period next year.

Another issue I had just come up is what about wheat? A lot of spring wheat producers are getting ready to plant and winter wheat producers are going to be looking at fall seeding. As we all know this year has been a real roller coaster for wheat. It’s been a very tough year to be a forward seller and great for the producer who stored and left it in the bin. Currently July 2009 wheat is trading in the $8.40 region which is high by historical standards but far under the winter highs. We all want the $10 to $12 range back to sell but the reality of the situation is with input costs going up for corn and beans, we could see increased wheat plantings as an alternative crop. This, plus the fact wheat plantings are increasing globally, all suggest we need to be very careful in waiting too long on selling next year’s wheat. I have to say one must now wait to see if there is any September frost scare for corn and beans but after that you need to be getting a floor in place. More on this later but this is an alert to start bringing your bullish prospective back to reality on wheat.

Finally, I will be at Corn College in Illinois for the next two days. If you are there, look me up.

The recommendations and opinions contained herein are based upon information from sources believed to be reliable. However, that information may be incomplete and unverified. There are numerous factors that can affect the markets, which cannot be fully accounted for in the preparation of these recommendations. Those following these recommendations do so at their own risk. The firm and/or customers of the firm may take a position that may not be consistent with the recommendations herein. Any recommendation does not constitute an offer to buy or sell or the solicitation of an offer to buy or sell any commodity interest. Commodity trading involves risks, and you should fully understand those risks before trading.

Margin call pressure is forcing all bulls out of the market today. The concern now is whether the funds going into today are still net long in both corn and beans? If cash flow drives the bulls out of the market, how far can we go down? The market has now corrected down to a double bottom formation. The test will be over the next 10 days or so. I have to believe most of the margin liquidation will be done prior to the report. The issue still is will we get confirmation of a bigger than expected corn yield—say 152 bu. to 154 bu. range. On the confirmation of the big yield, will we have any willing sellers at these price levels? In the end I don’t believe we will have a lot of new sellers because of the concern about frost. The problem is margin calls may override and force the final liquidation leg. I continue to believe the low in corn for this fall will be seen in the month of August and more than likely in the next 10 days of trading activity.

Special alert: This is time for all feed buyers and anyone wanting to be long for next spring and summer to be looking at buying December 2009 corn in a scale down buying strategy.

The big disappointment to producers continues to be beans. I’m getting a lot of calls from producers who stored beans and did not sell this summer. They are convinced the crop is not out there and they voted with their pocket book by keeping beans in the bin. Now that November beans have dropped 70 cents today and are below $13, the conviction of holding is getting tougher. I would not be surprised to see next week’s supply/demand report to be a little more positive to beans than corn. The yields will not be up as much. Near term I like buying beans a little more than buying corn. The current objective is the 5/8 gap on November beans. The top of the gap is $12.76 and the bottom of the gap is $12.37. I would suggest bottom pickers will be trying to buy beans on Project (A) tonight in the hope of getting a contrary Tuesday price bounce. Please note: the worse case downside price projection is the 5/1 low of $11.65.

Remember, I don’t believe there is any fundamental reason for this level of bearishness. It’s simply the funds are going from a net long to neutral to short bias. The size of their position simply moves the market this much.

The recommendations and opinions contained herein are based upon information from sources believed to be reliable. However, that information may be incomplete and unverified. There are numerous factors that can affect the markets, which cannot be fully accounted for in the preparation of these recommendations. Those following these recommendations do so at their own risk. The firm and/or customers of the firm may take a position that may not be consistent with the recommendations herein. Any recommendation does not constitute an offer to buy or sell or the solicitation of an offer to buy or sell any commodity interest. Commodity trading involves risks, and you should fully understand those risks before trading.